So many businesses start with excitement, trust, and good intentions — especially between friends, family, or spouses. But once money starts coming in or problems arise, things can turn sour fast. Without a written agreement, there’s no clarity about roles, money, or decision-making. A Partnership Agreement isn’t about distrust — it’s about protecting your relationship and the business you’re building together.
It’s your business safety net.
A Partnership Agreement is a legal document that outlines key details like: who the partners are, how much capital each one contributes, how profits and losses will be shared, what each person is responsible for, and what happens if someone wants to leave. It shows that everyone is serious and committed — not just making verbal promises. Without it, you’re exposed
I couldn’t do anything — it was all based on trust
Trust is great, but it’s not a legal strategy. Many entrepreneurs learn this the hard way. One partner may misuse business funds, sign contracts unilaterally, or even transfer assets — and without a proper agreement, it’s hard to hold them accountable. Courts need evidence. A well-drafted agreement protects everyone involved. You don’t draft it because you don’t trust them. You draft it because you trust the process.
Essentials for Every Partnership Agreement
If you’re drafting a Partnership Agreement, don’t miss these crucial points:
- Names and details of all partners
- Capital contributions & ownership percentages
- Roles and responsibilities
- Salary vs profit-sharing
- Access to bank accounts and signing authority
- Exit plan or death of a partner
- Conflict resolution process (mediation or court?)
- Signatures and date of effect
When all these are clear from day one, your business can grow on a strong and stable foundation.
Trusted each other so much, we didn’t even sign anything
Too many entrepreneurs skip legal paperwork because “we’re friends” or “we’re family.” But business and personal relationships must be managed differently. Without signatures, roles, or boundaries, things can spiral fast — especially when money’s involved. Don’t let your kindness cost you your company. Set the right expectations from the beginning. Legal doesn’t have to mean complicated — it just needs to be clear.
The law will decide for you — and you might not like it.
Under Malaysia’s Partnership Act 1961, if you don’t have your own written agreement, the law will assume equal profit sharing, equal responsibilities, and equal liabilities — regardless of who invested more or worked harder. That may not reflect your real situation. To avoid confusion, you need a custom agreement tailored to your business reality. Otherwise, you’re letting strangers (the courts) define your business terms.
Want to protect your business AND your relationship?
Whether your business is big or small, if there’s more than one founder or partner, a Partnership Agreement is non-negotiable. It’s not just a document — it’s peace of mind. It protects your money, your time, and your trust.
If you’re serious about your business, this is your first step. At Tetuan Liyana & Co., we help business partners draft solid, legally binding agreements that match their needs.
